7 Credit Card Companies Nifty Tactics

I am constantly amazed at the creativity of companies that offer credit cards. They use a wide diversity of tactics to appeal to people and convince them to either start using a credit card or use a credit card more than they actually would. Why? The more you use a card, the more likely you are to carry a balance on the card, and the more likely it is that the credit card company will make a mint off of you. Here are seven of my favorite tactics that credit card companies use to cloud the issue.

Appealing to your social conscience. This is my current favorite tactic, with my favorite example being the American Express Red card. Available in the UK, the American Express Red card donates 1% of your spending to Global Fund, a charity created to fight against AIDS. Even better: if you spend more than 4,000 pounds on the card, that percentage goes up to 1.25%. Why, the more you spend, the more you’re helping the world! Right? Right? Many local banks mimic the same deal: here’s a local credit card from the Albina Community Bank of Portland, Oregon, that “gives back” 1% of all spending on the card to local charities. Such thoughts make it easier for many to use the card, as they think, “If I use my plastic, Timmy’s playground will be that much better…” then the bill comes, the minimum payment is made, and the credit card issuer cleans up on the interest.

Advertising some spectacular “benefits” up front. When a credit card offer comes in the mail, the 0.0% number is the one that sticks in the head. “It’s free money!” some will think. Well, that 0.0% is often only for balance transfers and only for a short time – aside from that, the interest is well in the teens. Even better, the companies couple this with user agreements that consist of dozens of pages of small text, something most people won’t bother to read. Which is no big deal, really, considering that part of each of these agreements is a statement that the card issuer can change the rules at will.

Mixing with your desire to spend time with your family. Remember that old family board game, The Game of Life? I certainly do, but I don’t remember the newest addition to the game: Visa cards. That’s right – a classic board game has been “updated” to brand with the Visa logo. Whip out your credit cards so you can go on vacation, kids!

Distributing a lot of “points” that don’t provide strong merchandise choices. Many credit cards, including the well-promoted Chase Freedom card, offer a program that affords you points, which you can then exchange for a wide variety of items. Well, more like “wide variety” – many points programs are rather limited on the items you can get. “Redeem your points for gift cards/certificates, hotel stays, car rentals, travel on any airline with no blackout dates, or merchandise” says the offer, but the selection is often very arbitrary or the price of the item costs such an exorbitant amount of points that you had to have burnt through many, many thousands of dollars on your card to get it.

Conspiring with youth culture. What seven year old girl wouldn’t want a Hello Kitty Platinum Visa card (yes, I realize that Hello Kitty has something of a wider market than that). Even the executives at Sanrio, the company offering the card, admit that the card is targeting pre-teen girls. Hopefully, parents out there have some sense about allowing an eleven year old girl to have a credit card, but with the average American household with one or more credit cards holding down roughly $9K in credit card debt, I worry about it.

Trying to tap into your spirituality and politics. The Enlightenment Visa is a points-based credit card that directly targets … well, environmentalists and Buddhists. The rewards catalog for this card features some impressively overpriced and focuses entirely on tchotchkes of direct appeal to what I often describe as the SUV environmentalist crowd or, perhaps more commonly, metrospiritualists. I have no problem with someone who authentically subscribes to such a spiritual worldview, but it seems to me that such a worldview shouldn’t be expressed through use of a Visa card. Yet it apparently has appeal to people seeking out a “socially conscious” credit card.

Leveraging your status as a fan of an entertainer or sports team. Such cards are designed to draw in “super fans” who must have everything with their favorite entertainer or sports logo on it. Take the KISS credit card, with a nice 32.99% interest rate the first time you are late on a payment, or the NFL Extra Points card which can include your favorite team’s logo, a 1% points program for overpriced NFL merchandise, and, if you dig into the fine print, a 29.99% APR if you’re a day late on a payment. I would brush this off if I hadn’t seen both of them in use in the past month or so.

What’s the best thing you can do as a consumer to avoid such rip offs? First, ignore the picture on the card or the “identity” of the card. A credit card is a tool, not a means of expression – would you use a hammer made out of balsa wood if it was emblazoned with Hello Kitty or the logo of your favorite NFL team? Next, don’t encourage your children to use credit cards when they’re young. Keep everything in tangible cash so that they really understand the concept of money. Credit cards add an abstraction layer that makes it hard for many adults, let alone children.

I’ve always wondered if companies get a tax write-off for the money they donate to charities via programs such as the first one. If so, that makes it a sneaky way for them to actually be a bit more profitable, no?

Obviously the profit is at no cost to the consumer and at benefit to the recipients of the gift… but still an interesting thought

Nice summary of current marketing techniques. I have to disagree about the Chase Freedom card, though. It’s actually one of the better rewards cards that is currently being offered. You don’t have to take the rewards in “points”; you can get it in cashback as well. And if you wait until you accumulate $200 to redeem it, you will get 1.25% on everything (3.75% on some stuff). Most of the other current rewards cards have more catches to earn the higher cash back and are more “special purpose”. I still use my old Chase 5% cashback card for groceries/gas/drugstore purchases, but they don’t offer that one anymore. Plus, I can use the Freedom card for stuff that I don’t get 5% on. The best strategy to maximize your rewards is to use different rewards cards for different places to do better than 1%.

On the issue of points – I recently did pretty well with my ‘RBC Rewards’ from a Royal Bank VISA. Items like iPods & other electronics seemed to be valued at about 285 points to a dollar, whereas they offered RRSP Contribution Certificates at about 150 points to a dollar (RRSP is a tax-deductable, registered retirement savings plan in Canada). Of course it meant that I had to give the money right back to them in the form of a deposit into my RBC RRSP account, but that is what I would have done with any extra cash at the end of the year anyway.

One caveat to “0% balance transfers” that is rarely mentioned is the “transaction fee” that is often charged, usually 3% or so. Ergo, don’t do it unless the interest rate you’re moving FROM is higher than the transaction fee, and you plan on taking more than a year to pay it off.

just for fairness i’d like to point out that the version of the hello kitty card being marketed to kids is a visa buxx card, apparently a debit card in which parents can give children discretionary cash to spend, yes you could give kids the real credit card version, but they’re not directly marketing that version to kids.

Regarding the credit card companies trying to get us to use a credit card more often; what about the television commercials that Visa is currently running where it shows everything at the food court moving along nice & smoothly as long as everyone uses their Visa card. But, as soon as some poor cretin has the audacity to pay with (Gasp!) CASH! the whole system grinds to a halt while all the knowledgeable credit card users are forced to wait for the Luddite to get his change before slinking away in embarrassment.

I can’t watch that commercial without getting upset at how they are trying to brainwash us into thinking that paying cash is somehow inefficient and undesirable. I’m sure the credit card companies would be thrilled if we went to a true cashless society.

I almost have the opposite problem. I recently got an MTVu card as a complement to my Chase Cash Rewards card, so I’m getting 5% back on most everything I buy. It’s a great card, but I cringe every time I use it as I definitely do not identify with the MTV generation.

I disagree with not letting kids have a credit card when they are young. I got my first credit card at 16. My parents wanted me to be able to call a tow truck should my very-used car ever break down. The card had a low limit and I paid it in full, every month, with my own money.

By the time I reached college I understood how credit worked. I was comfortable using the credit card and wasn’t tempted by all the offers they throw at college kids to get them to sign up for new accounts. My roommate on the other hand managed to get herself thousands of dollars into debt within just a few short months.

When it came time to apply for an apartment, and eventually a mortgage, I had spectacular credit for my age and a knowledge of interest rates, fine print, and all those other things that come along with financial commitments like loans and credit cards.

Haha, I have a Kiss credit card! I got it probably 10 years ago when I had no understanding of credit cards, and I thought it was the coolest thing ever. I never use it now, and luckily I’ve never been late on it, because I had no idea about the 32.99% interest. Sheesh!

I also made the mistake of getting a Starbucks credit card last year because you get free Starbucks $. I guess it was bad luck, but I had the card number stolen 2 separate times in 6 months, and I was always hit with late charges, even though I paid with plenty of time to spare.

Now I just stick with my no-frills credit card which has no “rewards” and it doesn’t have Hello Kitty or Kiss on it, but also has low-interest and no late fees.

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